Thanks to Obama, Puerto Rico might never recover from Irma
The island was devastated by Irma. But it was ruined by the former president's austerity plan first.
In June 2016, Congress and President Obama passed a bill supposedly to address the economic crisis in Puerto Rico, by imposing external dictatorship on the island. Called the Puerto Rico Oversight, Management, and Economic Stability Act (or PROMESA), it placed an unelected seven-member board in total control of all important policy.
The supposed justification was to give the island some way to get through bankruptcy. In reality it has set the island up for a decade of mass unemployment and crisis — without remotely fixing the debt problem. It's no accident the locals call the board "La Junta."
And now Puerto Rico has suffered serious damage from Hurricane Irma, adding yet another problem to the pile. Without serious federal help, this crisis will continue indefinitely.
Subscribe to The Week
Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.
Sign up for The Week's Free Newsletters
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
Puerto Rico got into debt trouble through a combination of odd tax loopholes, irresponsible governance, and even more irresponsible lending. The details are complicated, but the most important thing to remember is that every bad loan has two parents, borrower and lender. If it was irresponsible to take money, it was even more irresponsible to give it to an entity that was clearly in over its head. Other Wall Street goons in the form of "vulture funds" have been downright predatory, buying up abandoned debt on the secondary market for a small fraction of its face value, then filing a blizzard of lawsuits to get the government to force Puerto Rico to pay up in full, by cannibalizing its public infrastructure.
The other thing that must be remembered is that the austerity always demanded by creditors during a debt crisis is straightforwardly self-defeating. As many countries have demonstrated since the 2008 financial crisis, austerity during a depression makes a debt problem worse, by strangling the economy and reducing tax revenue. It's like trying to undertake heavy manual labor while on a starvation diet — you just make yourself weak and sick.
What Puerto Rico needs right now is a big check from the federal government to get its economy re-pressurized, coupled to a debt restructuring and partial write-down to get it on a realistic repayment schedule. This would ideally be coupled to a thorough economic overhaul, and finally U.S. statehood. "Structural reform" has become a dirty word due to it usually being code for austerity and neoliberal assault on workers, but Puerto Rico's economy really does need work. Its labor force participation rate and productivity are low, its unemployment and poverty rate is high. Those problems will not be solved with budget cuts, but they are real problems.
What's more, Puerto Rico's infrastructure — long neglected due to the years of fiscal crisis — is in sorry shape, as was shown during Hurricane Irma. It took a fairly bad battering from the storm, which knocked down buildings and left hundreds of thousands without power ever before the highest winds arrived. The island's oil-fired power plants are outdated and fragile, and it has little solar power despite being a prime location (though one large plant was opened earlier this year). A big infrastructure update would be a splendid candidate for a federal stimulus plan to restore employment, stop the hemorrhaging of residents to the mainland, and increase productivity over the long term.
But as economist Martin Guzman explains, the PROMESA plan — its board, by the way, still has a fervent right-wing Social Security cutter — goes the opposite direction:
Despite the wreckage left by Irma and its sorry economic condition, many Puerto Ricans generously took in refugees from neighboring islands that suffered a direct hit. That, I suggest, is the attitude with which the American mainland should approach its Caribbean colony, still home to 3.4 million American citizens. They're in trouble and need help — and help could be easily provided.
Sign up for Today's Best Articles in your inbox
A free daily email with the biggest news stories of the day – and the best features from TheWeek.com
Ryan Cooper is a national correspondent at TheWeek.com. His work has appeared in the Washington Monthly, The New Republic, and the Washington Post.
-
The history of Donald Trump's election conspiracy theories
The Explainer How the 2024 Republican nominee has consistently stoked baseless fears of a stolen election
By David Faris Published
-
Two ancient cities have been discovered along the Silk Road
Under the radar The discovery changed what was known about the old trade route
By Devika Rao, The Week US Published
-
'People shouldn't have to share the road with impaired drivers'
Instant Opinion Opinion, comment and editorials of the day
By Justin Klawans, The Week US Published
-
US election: who the billionaires are backing
The Explainer More have endorsed Kamala Harris than Donald Trump, but among the 'ultra-rich' the split is more even
By Harriet Marsden, The Week UK Published
-
US election: where things stand with one week to go
The Explainer Harris' lead in the polls has been narrowing in Trump's favour, but her campaign remains 'cautiously optimistic'
By Harriet Marsden, The Week UK Published
-
Is Trump okay?
Today's Big Question Former president's mental fitness and alleged cognitive decline firmly back in the spotlight after 'bizarre' town hall event
By Harriet Marsden, The Week UK Published
-
The life and times of Kamala Harris
The Explainer The vice-president is narrowly leading the race to become the next US president. How did she get to where she is now?
By The Week UK Published
-
Will 'weirdly civil' VP debate move dial in US election?
Today's Big Question 'Diametrically opposed' candidates showed 'a lot of commonality' on some issues, but offered competing visions for America's future and democracy
By Harriet Marsden, The Week UK Published
-
1 of 6 'Trump Train' drivers liable in Biden bus blockade
Speed Read Only one of the accused was found liable in the case concerning the deliberate slowing of a 2020 Biden campaign bus
By Peter Weber, The Week US Published
-
How could J.D. Vance impact the special relationship?
Today's Big Question Trump's hawkish pick for VP said UK is the first 'truly Islamist country' with a nuclear weapon
By Harriet Marsden, The Week UK Published
-
Biden, Trump urge calm after assassination attempt
Speed Reads A 20-year-old gunman grazed Trump's ear and fatally shot a rally attendee on Saturday
By Peter Weber, The Week US Published